Shap Flash

Japanese Carriers Merge into ONE, Ocean Network Express

Japan’s three major shipping lines announced plans to merge into a single, consolidated joint venture company; the timing, however, remains in question.

“K” Line, MOL, and NYK Lines intended to establish the Ocean Network Express (ONE) by April of 2018. However, U.S. ‘gun jumping’ laws may force a much sooner launch.

Earlier this month, the U.S. Federal Maritime Commission (FMC) rejected the carriers’ joint venture proposal, citing that the Shipping Act of 1984 does not provide the FMC with the authority to approve mergers. This ‘tripartite’ agreement included provisions to prematurely transfer U.S. marine terminal shares and ownership interest within the new entity, which would violate the sharing of competitive information; already a major concern since the dawn of shipping alliance and vessel sharing agreements (VSA). The ONE must turn to the U.S. Department of Justice (DOJ) and the Federal Trade Commission to render a verdict.

The Ocean Network Express intended to operate as a joint venture alliance in the interim period leading up to the merger, but attention from U.S. Congress has the carriers rethinking their strategy. Third-party maritime service providers are adamantly lobbying against the industry’s new penchant for alliance formation and the joint contracting pressures that come with it. The DOJ has already opened investigations into carrier collusion at the request of U.S. domestic industry. FMC commissioner, William Doyle, noted that third-party joint contracting language has been attempted in almost every alliance and vessel-sharing agreement proposal.

The Ocean Network Express merger is not at risk to be blocked on the grounds of market concentration — the new joint venture will hold only 7.2 percent of the market — but as subpoenas are issued to fellow shipping lines, these three Japanese carriers must plan their next move carefully as U.S. industry and lawmakers take interest.